Nontrivial Exercises

Nortel on the Public Rebound?

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Nortel and Lucent are often considered peer companies in the telecom vendor industry. The two companies are roughly equivalent in number of employees, revenue, market focus stock price, market cap, and outlook. Two weeks ago, Lucent announced that it was lowering its sales outlook for 2006, sending both its and Nortel’s shares significantly lower. Then, this week, Lucent reported fourth quarter results of a loss of $104M, or $0.02 per share.

This had many analysts and investors renewing concerns about both the short term and long term viability of both companies.

Thursday, however, a BusinessWeek article describes what may be a growing confidence in the future of Nortel, while Lucent’s outlook seems less bright. Nortel’s new CEO, Mike Zafirovski has made several structural and personnel changes, and has begun to re-invigorate the employee and investor base with his vision and goals. There are several areas for Nortel that could be tapped for further cost reduction and efficiency, as well as product portfolio decisions that could stimulate growth. However, Lucent has already made several cuts and strategic moves, and could have fewer easy targets to hit for cost savings and growth, many analysts believe.

Nortel will report its fourth quarter and year-end results in early February.